Molina v. American Alternative Ins. Corp., S-04-389.

• Decision Date: 22 July 2005
• Docket Number: No. S-04-389.,S-04-389.
• Citation: 699 NW 2d 415,270 Neb. 218
• Parties: ROSA MOLINA, IN HER CAPACITY AS GUARDIAN OF MANUEL SALAZAR, AN INCAPACITATED PERSON, APPELLANT, v. AMERICAN ALTERNATIVE INSURANCE CORPORATION, A DELAWARE CORPORATION, APPELLEE.
• Court: Nebraska Supreme Court

270 Neb. 218

699 NW 2d 415

ROSA MOLINA, IN HER CAPACITY AS GUARDIAN OF MANUEL SALAZAR, AN INCAPACITATED PERSON, APPELLANT, v. AMERICAN ALTERNATIVE INSURANCE CORPORATION, A DELAWARE CORPORATION, APPELLEE.

No. S-04-389.

Supreme Court of Nebraska.

Filed July 22, 2005.

Maren Lynn Chaloupka, of Chaloupka, Holyoke, Hofmeister, Snyder & Chaloupka, for appellant.

Michael J. Javoronok, of Michael J. Javoronok Law Firm, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

STEPHAN, J.

On April 1, 2000, Manuel Salazar sustained serious personal injuries resulting from a motor vehicle accident caused by the negligence of a deputy sheriff employed by Scotts Bluff County. In Salazar v. Scotts Bluff Cty., 266 Neb. 444, 665 N.W.2d 659 (2003), this court held that despite a determination that Salazar's damages attributable to the negligence of the deputy sheriff amounted to $4,484,018, the county's legal liability to Salazar was limited to $1 million under Neb. Rev. Stat. § 13-926(1) (Reissue 1997), which provides that "[t]he total amount recoverable under the Political Subdivisions Tort Claims Act for claims arising out of an occurrence after November 16, 1985, shall be limited to [o]ne million dollars for any person for any number of claims arising out of a single occurrence."

In this action, Rosa Molina, as Salazar's legal guardian, seeks recovery from American Alternative Insurance Corporation (AAIC) of that portion of Salazar's damages which exceeded the statutory cap. AAIC issued a commercial umbrella insurance policy to Scotts Bluff County which was in effect at the time of the accident. After the district court for Scotts Bluff County sustained a motion to dismiss filed under Neb. Ct. R. of Pldg. in Civ. Actions 12(b)(6) (rev. 2003) and dismissed the action, Molina perfected this timely appeal, which we moved to our docket on our own motion pursuant to our authority to regulate the caseloads of the appellate courts of this state. See Neb. Rev. Stat. § 24-1106(3) (Reissue 1995). We affirm the judgment of the district court based upon our determination that Salazar has no contractual right of recovery under the AAIC policy.

BACKGROUND

A copy of the AAIC policy insuring Scotts Bluff County is attached to Molina's complaint and is thereby considered a part of the complaint pursuant to Neb. Ct. R. of Pldg. in Civ. Actions 10(c) (rev. 2003). The insuring agreement within the policy states in relevant part:

We will pay, on behalf of the insured, sums in excess of the amount payable under the terms of any Underlying Insurance as stated in the Schedule of Underlying Insurance, that the insured becomes legally obligated to pay as damages because of injury or damage to which this insurance applies.

The policy declarations reflect a limit of insurance of $4 million for "Each Occurrence." The schedule of underlying insurance included in the policy lists automobile liability coverage of $700,000 for "Each Occurrence." The policy defines "occurrence" as "an accident, including continuous and repeated exposure to substantially the same general harmful conditions which results in bodily injury or property damage which is neither expected nor intended from the standpoint of the insured."

In Salazar's prior action, he contended that the county had waived the benefits of the Political Subdivisions Tort Claims Act by procuring insurance in excess of the statutory limits set forth in § 13-926(1). In rejecting this claim, we held that the maximum liability of a political subdivision was set by the act, "and not by the limit of any liability policy purchased by the political subdivision." Salazar v. Scotts Bluff Cty., 266 Neb. 444, 450, 665 N.W.2d 659, 665 (2003).

In this action, Molina alleges that the county and its underlying insurance carrier have paid the $1 million judgment affirmed in Salazar, but that AAIC had denied liability under its policy. She further alleges that Salazar is entitled to recover that portion of his damages attributable to the county which exceeded the statutory cap, namely $3,484,018, from AAIC under its commercial umbrella policy. Molina alleges that Salazar is a third-party beneficiary of the policy; that AAIC "falsely and fraudulently represented that it would provide excess coverage for the benefit of third parties such as SALAZAR who were injured as a result of negligence on the part of the insured"; and that AAIC has been "unjustly enriched by charging, accepting, and keeping premium [sic] paid by Scotts Bluff County for the purpose of obtaining excess insurance coverage for third parties catastrophically injured by negligence attributable to Scotts Bluff County, when in fact AAIC had no intention of paying such excess coverage."

In its order sustaining the county's motion to dismiss, the district court determined that the dispositive issue of law was the meaning of the phrase "legally obligated to pay" in the policy's insuring agreement. Noting the absence of case law recognizing "an insurer's duty of indemnification in excess and independent of the legal obligations of its underlying insured," the district court held that "[t]he liability of an indemnification insurer is dependent upon and limited to recovery against the insured." Applying this principle, the court concluded:

AAIC's duty of indemnification is defined by its insured's" legal obligation to pay" which is synonymous with "required to pay". AAIC's insured, Scotts Bluff County, was "legally obligated" to pay one million dollars as damages to Salazar. In the complaint filed herein Molina acknowledges that that sum has been paid. Accordingly, the complaint does not state facts that would entitle Molina to relief, nor could it be amended to do so.

ASSIGNMENTS OF ERROR

Molina assigns that the district court erred in (1) finding that she did not state a claim upon which relief could be granted and (2) dismissing her complaint when a motion to compel discovery was pending and noticed for hearing.

STANDARD OF REVIEW

[1] A district court's grant of a motion to dismiss for failure to state a claim under rule 12(b)(6) is reviewed de novo, accepting all the allegations in the complaint as true and drawing all reasonable inferences in favor of the nonmoving party. Anderson v. Wells Fargo Fin. Accept., 269 Neb. 595, 694 N.W.2d 625 (2005); Weeder v. Central Comm. College, 269 Neb. 114, 691 N.W.2d 508 (2005).

[2] The interpretation of an insurance policy is a question of law, in connection with which an appellate court has an obligation to reach its own conclusions independently of the determination made by the trial court. Chief Indus. v. Great Northern Ins. Co., 268 Neb. 450, 683 N.W.2d 374 (2004).

ANALYSIS

[3,4] An insurance policy is a contract. McGinn v. State Farm Mut. Auto. Ins. Co., 268 Neb. 843, 689 N.W.2d 802 (2004); Guerrier v. Mid-Century Ins. Co., 266 Neb. 150, 663 N.W.2d 131 (2003). As a general rule, there is no privity between an injured person and the tort-feasor's liability insurer. For this reason, direct actions against liability insurance carriers based on the negligence of the insured are not permitted in Nebraska. Medical Protective Co. v. Schrein, 255 Neb. 24, 582 N.W.2d 286 (1998); West Neb. Gen. Hosp. v. Farmers Ins. Exch., 239 Neb. 281, 475 N.W.2d 901 (1991). Molina contends that this is not a direct action based upon the negligence of the insured, but, rather, a "direct action against an insurance carrier based on breach of its contract with its insured." Reply brief for appellant at 8. Molina does not challenge the district court's interpretation of the phrase "legally obligated to pay" as used in the insuring agreement. However, she contends that AAIC waived or is estopped from relying upon the policy language to limit its liability because it charged a premium for coverage in excess of the $1 million statutory cap and because it made a settlement offer in the prior action which exceeded the cap. Molina argues that she has standing to assert these contractual claims because Salazar is a third-party beneficiary of the AAIC policy.

This court has never held that an injured person is a third-party beneficiary of a liability insurance policy insuring the tort-feasor. Molina relies upon Shafer v. Berger, Kahn, Shafton, Moss, 107 Cal. App. 4th 54, 131 Cal. Rptr. 2d 777 (2003), to support her argument that Salazar is a third-party beneficiary of the AAIC policy. Shafer was an action brought by the judgment creditors of an insured against the liability insurer's attorney to recover for...